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Key Employee Insurance Protects the Future of your Business

by Inoventive Solutions
April 1, 2025

You have a great group of employees working with you and your business is thriving. For many small-to-mid-sized businesses that success is due to key employee with both skills, experience and connections that would be difficult to replace.

But what if one of your personnel were injured and out of work for a while, or even worse, suppose they died unexpectedly? Would your business survive without this key person’s involvement in your operations?

If this were to happen, you’d likely immediately have to find and train a replacement, but getting the right person for the job would require a substantial amount of training and building on-the-job knowledge. During this transitional time, you could face losing business if you are unable to fulfill all of your orders or contractual obligations or if delivery time starts slowing.

Fortunately, there are two products that would provide your organization with additional funds to weather this uncertain time: key person life insurance and key person disability insurance.

Key person life insurance

Generally, your business purchases a life insurance policy on a key employee, pays the premiums and is the beneficiary in the event of the employee’s death. As the owner of the policy, the business may surrender it, borrow against it and use either the cash value or death benefits as the business sees fit.

However, coming up with a dollar value on a key employee’s economic worth can be challenging.

There are no specific rules or formulas to follow, but there are several guidelines that can help.

  • The appropriate level of coverage might be the cost of recruiting and training an adequate replacement.
  • Or, the insurance amount might be the key employee’s annual salary times the number of years a newly hired replacement might take to reach a similar skill level.
  • Finally, you might consider the key employee’s value in terms of company profits. The level of insurance coverage might then be tied to any anticipated profit or loss.

Premiums for key employee life insurance are not a tax-deductible business expense for federal income tax purposes, since your business is the recipient of the benefits. For the most part, the death benefits your company receives as the beneficiary of the policy are not considered taxable income.

However, if your business is a C corporation, the death benefits may increase the corporation’s liability for the alternative minimum tax. You should consult a tax professional for information on your specific circumstances.

Key employee disability insurance

The death of a key employee isn’t the only threat to your business. What if a key employee is injured or becomes ill and is out of work for an extended period of time?  Disability insurance on such a key employee is another way you can protect your business against any resultant financial loss.

A crucial part of key employee disability insurance policies is the definition of disability.

Typically, these policies define disability as the inability of the employee to perform his or her normal job duties due to injury or illness. As with life insurance, your business buys a disability insurance policy on the employee, pays the premiums, and is named as the beneficiary.

If the employee becomes disabled, the insurance coverage pays monthly disability benefits to your business. These benefits can equal a certain percentage of the key employee’s monthly salary, up to either a maximum monthly limit or 100% of their salary.

The benefits may be used to pay the operating expenses of the business and to cover the expense of finding a temporary or permanent replacement for the key employee.

The disability policies typically offer elimination periods (i.e. the waiting period between the disability and when the benefits begin) ranging from 30 to 365 days.

Depending on the policy, your business may receive benefits for 6 to 18 months, which would be long enough to allow the key employee to return to work or for the company to replace the key employee.

Depending on the type of coverage purchased, the premiums you pay for the key employee disability policy may or may not be a tax-deductible business expense. If the policy is considered business overhead expense insurance, then the premiums are a deductible expense. 

While the business would be responsible for paying taxes on any disability benefits received, the business expenses the policy indirectly pays for would result in an offsetting deduction.

The takeaway

Planning ahead can help secure your company’s financial future. Key employee insurance can help assure families, employees, creditors, suppliers and customers that the future of the business is secure. 

By purchasing life and disability insurance on the owner(s) and/or key employees, you can are ensuring peace of mind in the event that a tragedy should befall one of your most important personnel.

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Budgeting and Prepping for Open Enrollment

by Inoventive Solutions
July 25, 2023

If you are running a business, you need to get an early start on preparations for your small group health plan open enrollment, particularly now as so much confusion abounds about the state of health insurance in the country.

With recent new regulations, options have changed for employers and you need to stay focused on maximizing your outcomes within your budget. You also want to drive participation, as that too can reduce overall rates for you.

Understand your options

Familiarize yourself with the various options that you have:

Health maintenance organizations – HMOs are typically the least expensive plans because they require enrollees to visit their personal physicians and tightly controlled in-network doctors. Going out of network is discouraged with high out-of-pocket costs. An HMO will usually only pay for care outside of the plan network when it’s an emergency or another unusual situation.

Preferred provider organizations – PPOs contract with hospital and provider networks to help control costs. While they will cover services outside of the network, the cost is higher than going in-network. PPOs are more flexible than HMOs, but premiums are often higher – as are some out-of-pocket costs.

One difference from an HMO: PPO enrollees don’t need a referral from their primary care physician if they are going to a specialist.

Point of service – A POS health plan is a mix between an HMO and a PPO-style health insurance policy. With a POS health plan, your staff has more choices than with an HMO, but they will usually need to select a primary care provider and need a referral to see a specialist.

Exclusive provider organizations – The EPO is also a PPO-HMO hybrid. Enrollees need to receive covered services inside of the network, except in a few instances, but they can also see a specialist without a referral from their primary care doctor. 

Besides the above, you will also need to decide if you want to reduce the premium for your organization and staff by offering high-deductible health plans. These plans can be either an HMO or a PPO, but they have the same feature of having a high deductible that needs to be met before benefits really kick in.

For 2024, for a plan to qualify as an HDHP the deductible must be at least $1,400 for an individual and $2,800 for a family. The average HDHP deductible is $2,349, but many plans exceed $3,000.

These plans usually have an attached health savings account to which your workers can transfer funds pre-tax from their paychecks to use for paying deductibles, copays and other medical expenses.

Check your budget

In 2022, group health insurance premiums averaged $659 a month ($7,911 annually) for single coverage, and $1,872 per month – or $22,463 per year – for a family, according to a survey of employers by the Kaiser Family Foundation.

You can reduce your premium outlays by imposing higher premium cost-sharing requirements on your staff. But, make sure you stay within the guidelines of the Affordable Care Act, which requires that plans be “affordable,” meaning they cannot cost more than 9.12% (in 2023) of an employee’s household income. This number changes each year, and the percentage has not yet been set for 2024.

Be mindful, though: if you try to unload too much of the premium on your workers, you may see people leave your plan and, if too many decide not to participate, you may not be able to offer the policy. Try to offer plans that will be valuable to your staff as well as affordable.

Maximizing enrollment

If you want to find out what your employees expect from their benefits, you can run a survey of all your staff. It can cover the basic elements of the plans you are going to choose from, and ask them which ones they would find most valuable. Then, move forward organizing your plan based on their response.

Your goal is maximum participation, and you can work with us to start disseminating materials and reaching out to those who may need plans explained to them. Give them some time to look the plans over. Employees want to know what changes are being made to their benefits packages in advance, so make sure you give them time to look through the offerings.

Next, plan to hold a meeting a month before open enrollment starts, in order to go over the plans and options with your staff, as well as any significant changes you’ve made.

During the meeting, highlight the value of each of the plans you are offering. Unfortunately, there will be those among your staff that haven’t really paid attention at all to the plan documents you gave them earlier.

Focus on the basics:

  • What each plan costs them.
  • What’s covered under the plan, and
  • When and how to use it.
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More Providers Charging for Some Health Portal Services

by Inoventive Solutions
December 22, 2022

As more health services are being rendered through providers’ patient portals and telemedicine, some providers are starting to bill for some of those interactions.

A number of health systems around the country have started billing for certain types of messages, largely ones that are involved in clinical assessments or medical history reviews that take more than five minutes. Those costs will be passed on to health plan enrollees — likely in the form of copays or coinsurance — and insurers.

Online and app-based portals have become increasingly popular, particularly since the onset of the COVID-19 pandemic, as more people grow accustomed to not seeing their doctor face to face for every visit. Often these portals will allow the health plan enrollee to ask their care team questions, and that’s when providers say they are not being paid for their time.

Is a new trend starting?

Patient portals were seeing little usage prior to the pandemic, which spurred demand as patients and providers needed a solution that didn’t require in-person interactions. Studies have shown that more than 80% of patients used telehealth at least once since the start of the pandemic, up from about 10% prior to 2020.

These portals also sometimes obviated the need even for a tele-visit with a doctor and opened the door for patients to message their doctor directly.

The issue recently came to the fore when Cleveland Clinic and a handful of other medical centers started charging for this service. 

Cleveland Clinic in November 2022 said it would start billing patients’ insurance companies for messages requiring at least five minutes of health care providers’ time to answer.

What will it cost?

Sending messages could cost as much as $50 per message depending on the time and skill necessary to answer the request. According to the announcement, people with individual or employer-sponsored group health insurance may be billed an average of $33 to $50 for each message taking more than five minutes. 

In announcing the new charges, Cleveland Clinic wrote: “Over the last few years, virtual options have played a bigger role in our lives. And since 2019, the amount of messages providers have been answering has doubled.”

According to a report in Becker’s Health IT, seven more large health systems around the country have also started billing for some patient portal services: Northshore University Health System in Evanston, Illinois; Northwestern Medicine in Chicago; Chicago-based Lurie’s Children’s Hospital; San Francisco-based UCSF Health; Renton, Washington-based Providence; and UW Medicine and Fred Hutch Cancer Center, which both have their headquarters in Seattle.

These hospitals say they will only bill for certain messages, such as those concerning:

  • Changes to a patient’s medications.
  • New symptoms the patient may be experiencing.
  • Changes to a long-term condition.
  • Check-ups on long-term condition care.
  • Requests to complete medical forms.

Messages may provide information on a treatment plan or recommend that the patient get a test done or schedule an appointment with a specialist. Doctors may often refer to the patient’s medical history and review their records for these communications, for example.

The providers say that other services on portals will remain free, such as:

  • Scheduling appointments.
  • Getting a prescription refilled.
  • Asking a question that leads to an appointment.
  • Asking a question about an issue the patient saw their provider for recently.
  • Checking in as a part of follow-up care after a procedure, such as a colonoscopy.
  • A patient giving a quick update to their doctor.

Experts predict that as more health services gravitate towards providers’ portals, hospitals and doctors will look to generate revenue from these services.

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How to Coax Your Employees to Enroll in an HDHP

by Inoventive Solutions
December 7, 2021

Employers looking for ways to decrease their group health insurance outlays over the past decade have been turning to high-deductible health plans as they offer lower up-front premiums.

In 2021, 51% of the U.S. workforce was enrolled in one of these plans, according to a recent survey by ValuePenguine.com.

But successfully coaxing your employees to choose an HDHP is not always easy. It means getting the deductible amounts right and educating them on how to best use these plans.

Also, while the plans are not for everyone, they can be a good fit for those who do not use their health plans much, are young and in good health. These employees may instead be overpaying for their premiums if they are not in an HDHP with an attached health savings account (HSA).

The key to encouraging your staff to adopt these plans is to first understand why some are reticent about them, how you can overcome their objections and how you can better tailor the plans for them. The following are the main reasons HDHP adoption may be lagging among covered workers.

Lack of education

One of the biggest hurdles to overcome is that many people are shocked to see the amount of the deductible, even as they save money on their premium. And on top of that sky-high deductible, they still have copays.

If you want employees that would be better suited for an HDHP to actually sign up for a plan, you need to take the extra time to:

  • Explain how HDHPs work and that there is a trade-off for high deductibles in exchange for lower up-front premiums.
  • Provide custom, side-by-side medical plan comparison tables and different medical usage scenarios to illustrate which types of individuals are best suited for an HDHP and which ones are not. (This would include scenarios of individuals who may be high health care users who may not be well suited for an HDHP.)
  • Explain how they can funnel what they save in premiums into an HSA so they can save their money for future medical expenses (more on HSAs later).

After covering all of the above, you should encourage your staff to pencil out the math to figure out which plan is right for themselves and their families. They can do this with the usage scenarios you provide. They may need assistance in doing this and you can encourage them to ask questions so they can make the best decision.

Too-high deductibles

While employees expect an HDHP to have a higher-deductible than a traditional plan, they can be shocked by a multi-thousand-dollar deductible. And many employers offer plans that are at the maximum end of the deductible spectrum.

For 2022, the maximum out-of-pocket deductible for an HSA-linked single HDHP is $7,050 and for a family plan the total deductible is $14,100. The minimum deductible for these plans is $1,400 for a single plan and $2,800 for a family plan.

You can work with us to model out multiple plan design scenarios that will help you save money on your group benefits bill while maximizing plan adoption. These models do a good job of explaining possible annual outlays and savings at different premium and deductible levels. 

You’re not contributing to their HSAs

Employers will often fund HSAs with a matching contribution up to a certain dollar amount, but that’s not required under law. As a result, many employers do not contribute to these accounts. But HSAs are critical to the success of HDHPs.

It’s often hard to impart the importance of an HSA and how it can benefit a worker years in the future. To generate interest, it’s a good idea for the employer to offer to contribute to the account if the employee sets up an account. Once an employer starts contributing, the likelihood of the employee starting to do so increases exponentially. 

When selling them on the benefits, explain that an HSA never expires. Your employees can keep them for life and let the funds grow in value through investments, and then put them to use when they are older or if they have health problems years later.

Additionally, they are funded with pre-tax earnings, and withdrawals are not taxed either.

Tell them this is essentially free money and that at some point this year or far in the future, they may need the money in the account to pay for medical services.

The takeaway

Helping your workforce understand how HDHPs (coupled with an HSA) can benefit them is the best way to encourage them to enroll.

You may not convince everyone that an HDHP is right for them, but if you get through to some of the ones who can benefit from an HDHP, they may share their experience with colleagues later.

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New Rule Requires Greater Health Plan Transparency

by Inoventive Solutions
December 3, 2020

The Trump Administration has issued a new rule that will require greater price transparency on the part of health insurers, including the rates charged by in-network physicians and copays and costs of drugs.

The final rule requires health plans and health insurers to disclose on a public website their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.  

The aim of the new rule is to give health plan enrollees more information when it comes to making decisions when seeking out and price-comparing care and choosing medications. With more information about health care costs, health plan enrollees can:

  • Make cost-conscious decisions,
  • Face fewer out-of-pocket surprise bills, and
  • Potentially lower their overall health care costs.

The drug price transparency part of the final rule came as a surprise because it was not included in the original proposed regulations.

The new rules do not, however, take effect right away and different parts will be implement at different times. Nonetheless, it’s important for health plan sponsors and employers to be aware of the rules as they will greatly affect how their employees access and shop for coverage and medications.

Most of the rules do not apply to grandfathered plans. Here’s what they will do once they come into effect:

Transparency for enrollees

Insurers will be required to make available to health plan enrollees the following information:

  • Personalized out-of-pocket cost information (for their particular plan) for all covered health care items and services, including prescription drugs.
  • All underlying negotiated rates for all covered health care items and services, including prescription drugs.

This information must be provided through an online tool on their website and in paper form upon request. Items or services include encounters, procedures, medical tests, supplies, drugs, durable medical equipment, and fees (including facility fees). 

Insurers will be required to make available an initial list of 500 shoppable services that will be determined by the Centers for Medicare and Medicaid, starting with the 2023 plan year. The remainder of all items and services will be required for these self-service tools for plan years that begin on or after Jan. 1, 2024.

Public transparency

Health insurers will be required to make available to the public, consumers, researchers and others the following information in “machine-readable” files:

  • Negotiated rates for all covered items and services with in-network providers.
  • Historical payments to, and billed charges from, out-of-network providers.
  • In-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.

The idea behind these changes is to provide opportunities for detailed research studies, data analysis, and offer third party developers the ability to create private apps and websites to help consumers shop for health care services and prescription drugs.

These files are required to be made public starting with the 2022 plan year.

The takeaway

These are final rules but, as mentioned, the part of the rule that affects your group health plan and your employees doesn’t take effect until 2023 as the industry will need time to prepare and comply. 

Once the rules take effect, your covered employees should have a wealth of information at their fingertips when they are shopping and comparing health services and drug information.

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